#feesmustfall: the end of the beginning

Please don’t be naïve and think that the #feesmustfall crisis will end when students go home for the annual summer break.

This is only the end of the beginning.

If we think government can solve the #feesmustfall crisis on its own, well, we are going to have to wait a long time. The money just isn’t there. So it is up to everyone to get involved. And we will have to work within the framework of existing legislation, at least for the foreseeable future.

So if we are going to make constructive progress it will be up to everyone to come up with a workable range of measures that could be announced in President Zuma’s opening address to parliament on February 2016, before students even enroll for the 2016 academic year. Wouldn’t that be a surprise?

We have to start off on the basis that we can probably halve the mountain to climb by using targeted interventions and not general exemptions as was achieved with the zero percent fee increase. General exemptions are no more than the equivalent of giving the rich a tax reduction.

Now some are talking section 18A donations from the university alumni community to help things along. Yes, every cent will help.  But there are many potential donors who are saying ‘ Stuff that. Unless and until the protests stop!”

A further problem with section 18A is that the donor cannot control the identity of the beneficiary of the donation.

But section 18A is not the be-all-and-end-all of financial assistance to students.

Section 10(1)(q) of the income tax act deals with the tax implications of employer provided bursaries. It’s a bit complicated so please humour me.

Section 10(1)(q) allows an employer to provide bursaries to employees without the employee paying tax on the fringe benefit.

But there are thresholds within section 10(1)(q) to stop employers providing bursaries for high-income employees. So, at present, in the context of higher education, these thresholds are

  • The bursary must not exceed R30 000 pa.
  • The employee must not earn more than R250 000 pa.

An employee who earns less than R250 000 pa have a maximum marginal tax rate of 26%. But those earning less than R181900 have a marginal rate of 18%. So the real value of the section 10(1)(q) is very limited. Only taxpayers earning between tax threshold (R73 650 pa) and R250 000 qualify.

So widen the exemption to apply to all taxpayers who earn less than R500 000 and we get a completely different result.

  • The middle working class of RSA (R73 650 – R500 000pa) get a tax subsidy on tertiary education of up to 36%.
  • The high-income earner (above R500 000pa) are excluded. As it should be.
  • Targeted financial aid for the lower income earners can be targeted at where it is needed by way of direct scholarships.
  • Employers are forced into the #feesmustfall crisis. They have to administer the scheme. Hopefully they will be generous by not salary sacrificing the whole amount.
  • Employers may even be able to claim some B-BBEE points ion the process.

In this way we can leave the targeted financial aid for the poor to concentrate on where they are most needed.


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